1 Answer

0 votes

Revenue Receipts: These are the amounts received in the normal and regular course of businesses mainly through sale of goods and services. An important feature of revenue receipts is that the amount received does not need to be returned to any one. All such receipts are revenue receipts and are treated as incomes. Hence, these are shown on the credit side of the Profit and Loss Account.

Capital Receipts - Capital receipts are the amounts received in the form of additional capital introduced in the business, loans received and sale proceeds of the fixed assets. You may observe that when a loan is received, it increases the business liability. Hence, it cannot be treated as revenue. Sale of any fixed asset reduces fixed assets hence, the amount received is not revenue earned in the normal course of business. In fact, capital receipts do not affect the profit or loss of the business. They either increase the liabilities or reduce the assets. Hence, these are shown in the Balance Sheet only.